AppLovin Corp [APP] Filings

10-Q 1 app-20240930.htm 10-Q app-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40325

AppLovin Corporation

(Exact name of registrant as specified in its charter)


Delaware						45-3264542
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1100 Page Mill Road

Palo Alto, California 94304

(Address of registrant’s principal executive offices, including zip code)

(800) 839-9646

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Class A common stock, par value $0.00003 per share

APP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2024, the number of shares of the registrant’s Class A common stock outstanding was 298,667,774 and the number of shares of the registrant’s Class B common stock outstanding was 36,924,030.

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			Page
PART I		FINANCIAL INFORMATION (UNAUDITED)	3
	Item 1.	Condensed Consolidated Financial Statements	3
		Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	3
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	4
		Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and 2023	5
		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023	6
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	8
		Notes to Condensed Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4.	Controls and Procedures	33

PART II		OTHER INFORMATION	34
	Item 1.	Legal Proceedings	34
	Item 1A.	Risk Factors	34
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
	Item 5.	Other Information	72
	Item 6.	Exhibits	74
		Signatures	75

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include statements about:

•our future financial performance, including our expectations regarding our revenue, cost of revenue, and operating expenses, and our ability to achieve or maintain future profitability;

•the sufficiency of our cash and cash equivalents to meet our liquidity needs;

•our ability to maintain the security and availability of our AppLovin Software Platform and AppLovin Apps;

•our expectations regarding the effects of existing and developing laws and regulations, including with respect to taxation, privacy, data protection and AI;

•our ability to attract and retain employees and key personnel;

•our expectations regarding the macroeconomic environment, inflation and high interest rates, uncertainty in the global banking and financial services markets, political uncertainty and international conflicts around the world;

•our ability to successfully expand our AI capabilities to support the further development of our Software Platform, including our advertising recommendation engine, AXON;

•our ability to maintain, protect and enhance our intellectual property;

•our ability to manage risk associated with our business;

•the demand for our AppLovin Software Platform and AppLovin Apps;

•our expectations concerning relationships with third parties;

•our ability to attract and retain clients and users;

•our ability to develop new products, features, and enhancements for our AppLovin Software Platform and to launch or acquire new AppLovin Apps and successfully monetize them;

•our ability to compete with existing and new competitors in existing and new markets and offerings;

•our ability to successfully expand into new markets;

•our ability to successfully acquire and integrate companies and assets and to expand and diversify our operations through strategic acquisitions and partnerships;

•our expectations regarding new and evolving markets;

•our expectations and management of future growth;

•our expectations regarding our share repurchase program, including future amounts available for repurchase; and

•our ability to develop and protect our brand.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to

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risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, partnerships, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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PART I – FINANCIAL INFORMATION (UNAUDITED)

Item 1. Condensed Consolidated Financial Statements

AppLovin Corporation

Condensed Consolidated Balance Sheets

(in thousands, except for share and per share data)

(unaudited)



	September 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	567,596	$	502,152
Accounts receivable, net	1,187,431		953,810
Prepaid expenses and other current assets	120,393		160,201
Total current assets	1,875,420		1,616,163
Property and equipment, net	177,052		173,331
Goodwill	1,852,299		1,842,850
Intangible assets, net	1,023,643		1,292,635
Other assets	514,070		434,208
Total assets	$	5,442,484	$	5,359,187
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	427,817	$	371,702
Accrued and other current liabilities	240,275		278,861
Short-term debt	35,563		215,000
Deferred revenue	75,881		78,559
Total current liabilities	779,536		944,122
Long-term debt	3,474,456		2,905,906
Other non-current liabilities	250,286		252,830
Total liabilities	4,504,278		4,102,858
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.00003 par value—100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2024 and December 31, 2023	—		—
Class A and Class B Common Stock, $0.00003 par value—1,700,000,000 (Class A 1,500,000,000 and Class B 200,000,000) shares authorized, 335,481,141 (Class A 298,557,111 and Class B 36,924,030) and 339,886,712 (Class A 268,774,090 and Class B 71,112,622) shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	11		11
Additional paid-in capital	992,588		2,134,581
Accumulated other comprehensive loss	(54,393)		(65,274)
Retained Earnings (Accumulated deficit)	—		(812,989)
Total stockholders’ equity	938,206		1,256,329
Total liabilities and stockholders’ equity	$	5,442,484	$	5,359,187

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AppLovin Corporation

Condensed Consolidated Statements of Operations

(in thousands, except for per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	1,198,235	$	864,256	$	3,336,469	$	2,329,826
Costs and expenses:
Cost of revenue	269,659		265,049		846,354		785,584
Sales and marketing	205,753		212,352		634,547		607,755
Research and development	149,990		159,288		469,209		441,563
General and administrative	37,899		41,249		120,880		116,231
Total costs and expenses	663,301		677,938		2,070,990		1,951,133
Income from operations	534,934		186,318		1,265,479		378,693
Other income (expense):
Interest expense	(75,213)		(78,583)		(224,061)		(204,081)
Other income, net	7,948		1,490		19,463		27,062
Total other expense, net	(67,265)		(77,093)		(204,598)		(177,019)
Income before income taxes	467,669		109,225		1,060,881		201,674
Provision for income taxes	33,249		586		80,309		17,196
Net income	434,420		108,639		980,572		184,478
Less: Net income attributable to participating securities	$	110	$	804	$	2,172	$	963
Net income attributable to common stock—Basic	$	434,310	$	107,835	$	978,400	$	183,515
Net income attributable to common stock—Diluted	$	434,314	$	107,869	$	978,475	$	183,545
Net income per share attributable to Class A and Class B common stockholders:
Basic	$	1.29	$	0.32	$	2.91	$	0.51
Diluted	$	1.25	$	0.30	$	2.81	$	0.50
Weighted average common shares used to compute net income per share attributable to Class A and Class B common stockholders:
Basic	336,931,269		341,435,759		336,167,052		357,009,609
Diluted	348,225,463		356,906,222		348,272,617		368,259,513

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AppLovin Corporation

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	434,420	$	108,639	$	980,572	$	184,478
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax	36,235		(17,127)		10,881		(10,275)
Other comprehensive income (loss), net of tax	36,235		(17,127)		10,881		(10,275)
Comprehensive income	$	470,655	$	91,512	$	991,453	$	174,203

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AppLovin Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Class A and Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity
	Shares	Par Value
Balance as of December 31, 2023	339,886,712	$	11	$	2,134,581	$	(65,274)	$	(812,989)	$	1,256,329
Stock issued in connection with equity awards	3,936,518	—		23,429		—		—		23,429
Shares withheld related to net share settlement of equity awards	(1,397,947)	—		(80,144)		—		—		(80,144)
Repurchase of Class A common stock	(13,466,397)	—		(752,224)		—		—		(752,224)
Stock-based compensation	—	—		95,253		—		—		95,253
Other comprehensive loss, net of tax	—	—		—		(18,622)		—		(18,622)
Net income	—	—		—		—		236,183		236,183
Balance as of March 31, 2024	328,958,886	$	11	$	1,420,895	$	(83,896)	$	(576,806)	$	760,204
Stock issued in connection with equity awards	9,435,913	—		9,377		—		—		9,377
Shares withheld related to net share settlement of equity awards	(4,226,153)	—		(356,336)		—		—		(356,336)
Stock-based compensation	—	—		98,354		—		—		98,354
Other comprehensive loss, net of tax	—	—		—		(6,732)		—		(6,732)
Net income	—	—		—		—		309,969		309,969
Balance as of June 30, 2024	334,168,646	$	11	$	1,172,290	$	(90,628)	$	(266,837)	$	814,836
Stock issued in connection with equity awards	6,326,502	—		9,747		—		—		9,747
Shares withheld related to net share settlement of equity awards	(2,398,996)	—		(207,962)		—		—		(207,962)
Repurchase of Class A common stock	(2,615,011)	—		(61,490)		—		(167,583)		(229,073)
Stock-based compensation	—	—		80,003		—		—		80,003
Other comprehensive income, net of tax	—	—		—		36,235		—		36,235
Net income	—	—		—		—		434,420		434,420
Balance as of September 30, 2024	335,481,141	$	11	$	992,588	$	(54,393)	$	—	$	938,206

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AppLovin Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Class A and Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Par Value
Balance as of December 31, 2022	373,873,683	$	11	$	3,155,748	$	(83,382)	$	(1,169,700)	$	1,902,677
Stock issued in connection with equity awards	4,061,015	—		2,974		—		—		2,974
Shares withheld related to net share settlement of equity awards	(1,281,849)	—		(19,167)		—		—		(19,167)
Repurchase of Class A common stock	(5,396,617)	—		(76,358)		—		—		(76,358)
Stock-based compensation	—	—		82,966		—		—		82,966
Other comprehensive income, net of tax	—	—		—		10,006		—		10,006
Net loss	—	—		—		—		(4,518)		(4,518)
Balance as of March 31, 2023	371,256,232	$	11	$	3,146,163	$	(73,376)	$	(1,174,218)	$	1,898,580
Stock issued in connection with equity awards	4,227,973	—		5,748		—		—		5,748
Shares withheld related to net share settlement of equity awards	(1,503,757)	—		(37,436)		—		—		(37,436)
Repurchase of Class A common stock	(25,483,835)	—		(503,448)						(503,448)
Stock-based compensation	—	—		76,753		—		—		76,753
Other comprehensive loss, net of tax	—	—		—		(3,154)		—		(3,154)
Net income	—	—		—		—		80,357		80,357
Balance as of June 30, 2023	348,496,613	$	11	$	2,687,780	$	(76,530)	$	(1,093,861)	$	1,517,400
Stock issued in connection with equity awards	4,621,926	—		11,319		—		—		11,319
Shares withheld related to net share settlement of equity awards	(1,549,778)	—		(59,243)		—		—		(59,243)
Repurchase of Class A common stock	(15,784,833)	—		(573,787)		—		—		(573,787)
Stock-based compensation	—	—		108,589		—		—		108,589
Other comprehensive loss, net of tax	—	—		—		(17,127)		—		(17,127)
Net income	—	—		—		—		108,639		108,639
Balance as of September 30, 2023	335,783,928	$	11	$	2,174,658	$	(93,657)	$	(985,222)	$	1,095,790

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AppLovin Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2024		2023
Operating Activities
Net income	$	980,572	$	184,478
Adjustments to reconcile net income to operating activities:
Amortization, depreciation and write-offs	320,843		369,897
Stock-based compensation	275,534		275,058
Other	17,229		21,826
Changes in operating assets and liabilities:
Accounts receivable	(237,530)		(146,796)
Prepaid expenses and other assets	33,199		(29,484)
Accounts payable	55,575		7,955
Accrued and other liabilities	(47,414)		34,588
Net cash provided by operating activities	1,398,008		717,522
Investing Activities
Purchase of non-marketable equity securities	(76,983)		(16,934)
Acquisition of intangible assets	(18,289)		(51,816)
Other investing activities	(11,115)		(2,275)
Net cash used in investing activities	(106,387)		(71,025)
Financing Activities
Repurchases of stock	(980,672)		(1,153,593)
Principal repayments of debt	(686,754)		(490,494)
Payment of withholding taxes related to net share settlement of equity awards	(644,442)		(115,846)
Payments of licensed asset obligation	—		(15,254)
Proceeds from issuance of debt	1,072,330		395,281
Proceeds from issuance of common stock upon exercise of stock options and purchase of ESPP shares	28,800		19,878
Other financing activities	(15,949)		(32,239)
Net cash used in financing activities	(1,226,687)		(1,392,267)
Effect of foreign exchange rate on cash and cash equivalents	510		(2,223)
Net increase (decrease) in cash and cash equivalents	65,444		(747,993)
Cash and cash equivalents at beginning of the period	502,152		1,080,484
Cash and cash equivalents at end of the period	$	567,596	$	332,491

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AppLovin Corporation

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2024		2023
Supplemental non-cash investing and financing activities disclosures:
Right-of-use assets acquired in exchange for lease obligations	$	24,527	$	45,242
Supplemental disclosure of cash flow information:
Cash paid for interest, net	$	220,140	$	184,600
Cash paid for income taxes, net of refunds	$	61,825	$	12,749

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AppLovin Corporation

Notes to the Condensed Consolidated Financial Statements

(unaudited)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

AppLovin Corporation (the “Company” or “AppLovin”) was incorporated in the state of Delaware on July 18, 2011. The Company is a leader in the advertising ecosystem providing an end-to-end software platform that allows businesses to reach, monetize and grow their global audiences. The Company also has a globally diversified portfolio of apps—free-to-play mobile games that it operates through its studios.

The Company is headquartered in Palo Alto, California, and has several operating locations in the U.S. as well as various international office locations in North America, Asia, and Europe.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, the unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2024. The condensed consolidated balance sheet data as of December 31, 2023 was derived from the audited consolidated financial statements at that date but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of the Company’s financial position, results of operations, cash flows and stockholders’ equity for the interim periods presented. The results of operations for the three and nine months ended September 30, 2024 shown in this report are not necessarily indicative of the results to be expected for the full year ending December 31, 2024 or any other period.

Basis of Consolidation

The Company's condensed consolidated financial statements include accounts of the Company and its wholly-owned and majority-owned subsidiaries, and the ownership interest of minority investors is recorded as noncontrolling interest. In accordance with the provisions of Accounting Standards Codification ("ASC") 810, Consolidation, the Company is also required to consolidate any variable interest entities ("VIE") when it is the primary beneficiary. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE, or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with all VIEs on an ongoing basis. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of the Company's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to fair values of assets and liabilities acquired through acquisitions, useful lives of intangible assets and property and equipment, expected period of consumption of virtual goods, income and indirect taxes, contingent liabilities, evaluation of recoverability of intangible assets and other long-lived assets, goodwill impairment, stock-based compensation, fair value of derivatives and other financial instruments. These estimates are inherently subject to judgment and actual results could differ materially from those estimates.

Recent Accounting Pronouncements (Issued Not Yet Adopted)

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. The amendments will be effective for fiscal

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years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments must be applied retrospectively, and early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures, which requires disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments will be effective for annual periods beginning after December 15, 2024. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

2. Revenue

Revenue from Contracts with Customers

The Company generates Software Platform and Apps revenue. Software Platform revenue is generated primarily from fees collected from advertisers and advertising networks who use the Software Platform. Apps revenue consists of in-app purchase ("IAP") revenue generated from in-app purchases made by users within the Company’s apps (“Apps”), and in-app advertising ("IAA") revenue generated from advertisers that purchase ad inventory from Apps.

Software Platform Revenue

The vast majority of the Software Platform Revenue is generated through AppDiscovery and MAX, which provide the technology to match advertisers and owners of digital advertising inventory (“Publishers”) via auctions at large scale and microsecond-level speeds. The terms for all mobile advertising arrangements are governed by the Company’s terms and conditions and generally stipulate payment terms of 30 days subsequent to the end of the month. Substantially all of the Company's contracts with customers are fully cancellable at any time or upon short notice.

The Company’s performance obligation is to provide customers with access to the Software Platform, which facilitates the advertiser’s purchase of ad inventory from Publishers. The Company does not control the ad inventory prior to its transfer to the advertiser, because the Company does not have the substantive ability to direct the use of nor obtain substantially all of the remaining benefits from the ad inventory. The Company is not primarily responsible for fulfillment and does not have any inventory risk. The Company is an agent as it relates to the sale of third-party advertising inventory and presents revenue on a net basis. The transaction price is the product of either the number of completions of agreed upon actions or advertisements displayed and the contractually agreed upon price per advertising unit with the advertiser less consideration paid or payable to Publishers. The Company recognizes Software Platform Revenue when the agreed upon action is completed or when the ad is displayed to users. The number of advertisements delivered and completions of agreed upon actions is determined at the end of each month, which resolves any uncertainty in the transaction price during the reporting period.

Software Platform Revenue also includes revenue generated from Adjust's measurement and analytics marketing platform that is recognized ratably over the subscription period, generally up to twelve months. Revenue from other services within the Software Platform was not material.

Apps Revenue

In-App Purchase Revenue

IAP Revenue includes fees collected from users to purchase virtual goods to enhance their gameplay experience. The identified performance obligation is to provide users with the ability to acquire, use, and hold virtual items over the estimated period of time the virtual items are available to the user or until the virtual item is consumed. Payment is required at the time of purchase, and the purchase price is a fixed amount.

Users make IAPs through the Company’s distribution partners. The transaction price is equal to the gross amount charged to users because the Company is the principal in the transaction. IAP fees are non-refundable. Such payments are initially recorded as deferred revenue. The Company categorizes its virtual goods as either consumable or durable. Consumable virtual goods represent goods that can be consumed by a specific player action in gameplay; accordingly, the Company recognizes revenue from the sale of consumable virtual goods as the goods are consumed. Durable virtual goods represent goods that are accessible to the user over an extended period of time; accordingly, the Company recognizes revenue from the sale of durable virtual goods ratably over the period of time the goods are available to the user, which is generally the estimated average user life (“EAUL”).

The EAUL represents the Company’s best estimate of the expected life of paying users for the applicable game. The EAUL begins when a user makes the first purchase of durable virtual goods and ends when a user is

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determined to be inactive. The Company determines the EAUL on a game-by-game basis. For a newly launched game with limited playing data, the Company determines its EAUL based on the EAUL of a game with sufficiently similar characteristics.

The Company determines the EAUL on a quarterly basis and applies such calculated EAUL to all bookings in the respective quarter. Determining the EAUL is subjective and requires management’s judgment. Future playing patterns may differ from historical playing patterns, and therefore the EAUL may change in the future. The EAULs are generally between five and ten months.

In-App Advertising Revenue

IAA Revenue is generated by selling ad inventory on the Company's Apps to third-party advertisers. Advertisers purchase ad inventory either through the Software Platform or through third-party advertising networks (“Ad Networks”). Revenue from the sale of ad inventory through Ad Networks is recognized net of the amounts retained by Ad Networks as the Company is unable to determine the gross amount paid by the advertisers to Ad Networks. The Company recognizes revenue when the ad is displayed to users.

The Company presents taxes collected from customers and remitted to governmental authorities on a net basis.

Disaggregation of Revenue

The following table presents revenue disaggregated by segment and type (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Software Platform Revenue	$	835,186	$	504,452	$	2,224,571	$	1,265,273
In-App Purchase Revenue	246,344		247,309		756,110		732,262
In-App Advertising Revenue	116,705		112,495		355,788		332,291
Total Apps Revenue	363,049		359,804		1,111,898		1,064,553
Total Revenue	$	1,198,235	$	864,256	$	3,336,469	$	2,329,826

Revenue disaggregated by geography, based on user location, consists of the following (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
United States	$	657,778	$	500,586	$	1,923,885	$	1,393,625
Rest of the World	540,457		363,670		1,412,584		936,201
Total Revenue	$	1,198,235	$	864,256	$	3,336,469	$	2,329,826

Contract Balances

Contract liabilities consist of deferred revenue, which are recorded for payments received in advance of the satisfaction of performance obligations. During the three months ended September 30, 2024 and 2023, the Company recognized $41.6 million and $48.4 million of revenue that was included in deferred revenue as of June 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $76.2 million and $62.5 million of revenue that was included in deferred revenue as of December 31, 2023 and 2022, respectively.

Unsatisfied Performance Obligations

Substantially all of the Company’s unsatisfied performance obligations relate to contracts with an original expected length of one year or less.

3. Financial Instruments and Fair Value Measurements

Non-Marketable Equity Securities Measured at Net Asset Value

The Company held equity interests in certain private equity funds of $78.9 million and $56.7 million as of September 30, 2024 and December 31, 2023, respectively, which are measured using the net asset value practical expedient. Under the net asset value practical expedient, the Company records investments based on the proportionate share of the underlying funds’ net asset value as of the Company's reporting date. These investments are included in other assets in the Company’s condensed consolidated balance sheets.

These funds vary in investment strategies and generally have an initial term of 7 to 10 years, which may be

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extended for 2 to 3 additional years with the applicable approval. These investments are subject to certain restrictions regarding transfers and withdrawals and generally cannot be redeemed with the funds. Distributions from the funds will be received as the underlying investments are liquidated. The Company’s maximum exposure to loss is limited to the carrying value of these investments of $78.9 million and the unfunded commitments of $22.2 million as of September 30, 2024.

During the three and nine months ended September 30, 2024, the Company made total capital contributions of $0.7 million and $19.0 million, respectively, related to these investments. No material unrealized gain or loss was recorded related to these investments for the three and nine months ended September 30, 2024. The unrealized gains related to these investments were $2.3 million and $7.3 million for the three and nine months ended September 30, 2023, respectively.

Non-Marketable Equity Securities Measured at Fair Value on a Non-Recurring Basis

The Company's non-marketable equity securities are investments in privately held companies without readily determinable fair values. The Company elected the measurement alternative to account for these investments. Under the measurement alternative, the carrying value of the non-marketable equity securities are adjusted based on price changes from observable transactions of identical or similar securities of the same issuer or for impairment. Any changes in carrying value are recorded within other income, net in the Company's condensed consolidated statement of operations.

In February 2024, the Company entered into an agreement to invest $50.0 million in the Series C preferred stock financing of Humans, Inc., the developer of the Flip Shop social shopping app ("Flip Shop"), of which $10.0 million was closed in February 2024 and the remaining $40.0 million was closed in April 2024. In February 2024, the Company also entered into an arm's length commercial agreement with Flip Shop related to its use of the Company's AXON technology under a revenue share model.

In the second quarter of 2024, the Company purchased certain additional non-marketable equity securities for a total of $8.0 million.

As of September 30, 2024 and December 31, 2023, the carrying amounts of the Company's non-marketable equity securities were $68.1 million and $10.1 million, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets.

4. Commitments and Contingencies

Commitments

As of September 30, 2024, the Company's non-cancelable minimum purchase commitment was primarily related to a multi-year contractual arrangement with a cloud services provider. In August 2024, the Company amended its agreement with the cloud services provider. Under the amended agreement, the Company committed to spend a minimum of $1.26 billion over a three-year period. As of September 30, 2024, no payment had been made towards this commitment. In addition, the Company had total unfunded commitments of $22.2 million related to investments in certain private equity funds. For additional information, see Note 3 – Financial Instruments and Fair Value Measurements.

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

Letters of Credit

As of September 30, 2024 and December 31, 2023, the Company had outstanding letters of credit in the aggregate amount of $6.3 million and $6.3 million, respectively, which were issued as security for certain leased office facilities under the Credit Agreement. These letters of credit have never been drawn upon.

Legal Proceedings

The Company is involved from time to time in litigation, claims, and proceedings. The outcomes of the Company’s legal proceedings are inherently unpredictable and subject to significant uncertainty.

The Company records a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. If it is determined that a loss is reasonably possible and the loss or range of loss can be estimated, the reasonably possible loss is disclosed. The Company evaluates developments in legal matters that

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could affect the amount of liability that has been previously accrued, and related reasonably possible losses disclosed, and makes adjustments as appropriate. Significant judgment is required to determine the likelihood of matters and the estimated amount of a loss related to such matters. To date, losses in connection with legal proceedings have not been material.

The Company expenses legal fees in the period in which they are incurred.

Indemnifications

The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including certain customers, business partners, investors, contractors and the Company’s officers, directors and certain employees. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the Company’s condensed consolidated statements of operations in connection with the indemnification provisions have not been material. As of September 30, 2024, the Company did not have any material indemnification claims that were probable or reasonably possible.

Non-income Taxes

The Company may be subject to audit by various tax authorities with regard to non-income tax matters. The subject matter of non-income tax audits primarily arises from different interpretations on tax treatment and tax rates applied. The Company accrues liabilities for non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss.

5. Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reporting unit (in thousands):


	Software Platform		Apps		Total
December 31, 2023	$	1,497,109	$	345,741	$	1,842,850

Foreign currency translation	9,449		—		9,449
September 30, 2024	$	1,506,558	$	345,741	$	1,852,299

Intangible assets, net consisted of the following (in thousands):


	Weighted- Average Remaining Useful Life (Years)	As of September 30, 2024						As of December 31, 2023
		Gross Carrying Value		Accumulated Amortization		Net Book Value		Gross Carrying Value		Accumulated Amortization		Net Book Value


Apps	3.4	$	1,831,339	$	(1,355,000)	$	476,339	$	1,818,907	$	(1,152,611)	$	666,296
Customer relationships	7.5	521,126		(150,870)		370,256		519,175		(111,374)		407,801
User base	1.5	68,817		(54,188)		14,629		68,817		(46,874)		21,943
License asset	1.3	60,707		(41,580)		19,127		59,207		(31,003)		28,204
Developed technology	2.9	208,798		(114,969)		93,829		207,900		(88,716)		119,184
Other	2.8	79,051		(29,588)		49,463		71,196		(21,989)		49,207
Total intangible assets		$	2,769,838	$	(1,746,195)	$	1,023,643	$	2,745,202	$	(1,452,567)	$	1,292,635

The Company recorded amortization expenses related to acquired intangible assets as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	73,679	$	93,398	$	245,493	$	288,180
Sales and marketing	16,851		16,829		50,472		50,397
Total	$	90,530	$	110,227	$	295,965	$	338,577

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6. Equity

In February 2022, the Company's Board authorized the repurchase of up to $750.0 million of the Company’s Class A common stock. In May and August 2023, the Company's Board authorized increases to the repurchase program of $296.0 million and $447.6 million, respectively. In February 2024, the Company's Board authorized an additional increase of $1.25 billion to the repurchase program.

Repurchases may be made from time to time through open market purchases or through privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company may also, from time to time, enter into Rule 10b-5 trading plans, to facilitate repurchases of shares. The repurchase program does not obligate the Company to acquire any particular amount of Class A common stock, has no expiration date and may be modified, suspended, or terminated at any time at the Company's discretion.

During the nine months ended September 30, 2024 and 2023, the Company repurchased and subsequently retired 16,081,408 and 46,665,285 shares of Class A common stock for an aggregate amount, including commissions and fees, of $981.3 million and $1,153.6 million, respectively. As of September 30, 2024, $271.0 million remains available of the authorized amount under the repurchase program.

During the three and nine months ended September 30, 2024, 268,791 and 34,188,592 shares of Class B common stock were converted to Class A common stock, respectively.

7. Stock-based Compensation

The Company maintains three equity compensation plans that provide for the issuance of shares of its common stock to the Company’s employees, directors, consultants and other service providers: the 2021 Equity Incentive Plan (the "2021 Plan"), the 2021 Partner Studio Incentive Plan, and the 2021 Employee Stock Purchase Plan (the "ESPP").

In February 2024, the Company settled a liability of $15.7 million related to certain Wurl performance-based incentive plan through the issuance of 346,836 shares of the Company's Class A common stock under the 2021 Plan and $2.1 million in cash.

During the nine months ended September 30, 2024, 13,493,410 performance-based restricted stock units ("PSUs") vested upon the achievement of stock price targets ranging from $46.75 to $79.00 per share, resulting in a total stock-based compensation expense of $64.5 million. As of September 30, 2024, there were no unvested PSUs outstanding.

During the nine months ended September 30, 2024, the Company granted 211,977 restricted stock units ("RSUs") to certain employees under the 2021 Plan at a weighted average grant date fair value of $63.59 per share. These awards vest based on a service condition that is satisfied generally over one year.

During the nine months ended September 30, 2024, 226,066 shares of Class A common stock were purchased under the ESPP.

Stock-based compensation expense is attributed to the cost center to which the award holder belongs. The following table summarizes total stock-based compensation expense by function (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	1,314	$	1,309	$	4,104	$	3,942
Sales and marketing	22,203		26,025		67,651		62,121
Research and development	47,940		70,462		169,205		176,337
General and administrative	10,100		13,043		34,574		32,658
Total	$	81,557	$	110,839	$	275,534	$	275,058

8. Earnings Per Share

The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 20 votes per share. Each share of Class B common stock is convertible into a share of Class A common stock voluntarily at any time by the holder, and automatically upon certain events. The Class A common stock has no conversion rights. As the liquidation and

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dividend rights are identical for Class A and Class B common stock, the undistributed earnings are allocated on a proportional basis and the resulting net income per share attributable to common stockholders will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.

The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders (in thousands, except share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Basic EPS
Numerator:
Net income	$	434,420	$	108,639	$	980,572	$	184,478
Less:
Income attributable to options exercised by promissory notes	(110)		(442)		(1,169)		(720)
Income attributable to common stock subject to share repurchase agreements	—		(360)		(1,001)		(228)
Income attributable to unvested early exercised options	—		(2)		(2)		(15)
Net income attributable to common stockholders—Basic	$	434,310	$	107,835	$	978,400	$	183,515
Denominator:
Weighted-average shares used in computing net income per share—Basic	336,931,269		341,435,759		336,167,052		357,009,609
Net income per share attributable to common stockholders—Basic:	$	1.29	$	0.32	$	2.91	$	0.51
Diluted EPS
Numerator:
Net income	$	434,420	$	108,639	$	980,572	$	184,478
Less:
Income attributable to options exercised by promissory notes	(106)		(423)		(1,129)		(698)
Income attributable to common stock subject to share repurchase agreements	—		(345)		(967)		(220)
Income attributable to unvested early exercised options	—		(2)		(2)		(15)
Net income attributable to common stockholders—Diluted	$	434,314	$	107,869	$	978,475	$	183,545
Denominator:
Weighted-average shares used in computing net income per share—Basic	336,931,269		341,435,759		336,167,052		357,009,609
Weighted-average dilutive stock awards	11,294,194		15,470,463		12,105,565		11,249,904
Weighted-average shares used in computing net income per share—Diluted	348,225,463		356,906,222		348,272,617		368,259,513
Net income per share attributable to common stockholders—Diluted:	$	1.25	$	0.30	$	2.81	$	0.50

The following table presents the forms of antidilutive potential common shares:


	As of September 30,
	2024	2023
Stock options exercised for promissory notes	85,000	1,399,999
Early exercised stock options	—	5,736
Stock options	—	613,968
Unvested RSUs	—	4,747,127
ESPP	32,784	—
Total antidilutive potential common shares	117,784	6,766,830

9. Income Taxes

The Company is subject to income taxes in the U.S. and in foreign jurisdictions. The Company bases the interim tax accruals on an estimated annual effective tax rate applied to year-to-date income and records the discrete tax items in the period to which they relate. In each quarter, the Company updates the estimated annual effective tax rate and makes a year-to-date adjustment to the tax provision as necessary. The Company’s calendar

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year 2024 annual effective tax rate differs from the U.S. statutory rate primarily due to jurisdictional mix of earnings, stock-based compensation expense, research and development credits, foreign tax credits, foreign derived intangible income deduction, and global intangible low-taxed income.

During the nine months ended September 30, 2024, there were no material changes to the Company's unrecognized tax benefits, and the Company does not expect material changes in unrecognized tax benefits within the next twelve months.

10. Segments

The Company determines its operating segments based on how its chief operating decision maker (“CODM”), the Chief Executive Officer, manages the business, allocates resources, makes operating decisions and evaluates operating performance. The Company's two operating and reportable segments are as follows:

•Software Platform: Software Platform generates revenue primarily from fees paid by advertisers for the placement of ads on mobile applications owned by Publishers.

•Apps: Apps generates revenue when a user of one of the Apps makes an in-app purchase and when an advertiser purchases the digital advertising inventory of the Company's portfolio of Apps.

The CODM evaluates the performance of each operating segment using revenue and segment adjusted EBITDA. The Company defines segment adjusted EBITDA as revenue less expenses, excluding depreciation and amortization and certain items that the Company does not believe are reflective of the operating segments’ core operations. Expenses include indirect costs that are allocated to operating segments based on a reasonable allocation methodology, which are generally related to sales and marketing activities and general and administrative overhead. Revenue and expenses exclude transactions between the Company's operating segments. The CODM does not evaluate operating segments using asset information, and, accordingly, the Company does not report asset information by segment.

The following table provides information about the Company's reportable segments and a reconciliation of the total segment adjusted EBITDA to income before income taxes (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue:
Software Platform	$	835,186	$	504,452	$	2,224,571	$	1,265,273
Apps	363,049		359,804		1,111,898		1,064,553
Total Revenue	$	1,198,235	$	864,256	$	3,336,469	$	2,329,826

Segment Adjusted EBITDA:
Software Platform	$	653,396	$	364,117	$	1,665,898	$	855,697
Apps	68,220		55,174		205,683		170,806
Total Segment Adjusted EBITDA	$	721,616	$	419,291	$	1,871,581	$	1,026,503

Interest expense	$	(75,213)	$	(78,583)	$	(224,061)	$	(204,081)
Other income, net	4,500		771		17,138		26,359
Amortization, depreciation and write-offs	(99,635)		(121,797)		(320,843)		(369,897)
Loss on disposal of long-lived assets	—		—		(1,646)		—
Non-operating foreign exchange gain	935		613		1,159		1,159
Stock-based compensation	(81,557)		(110,839)		(275,534)		(275,058)
Transaction-related expense	(26)		(231)		(880)		(995)
Restructuring costs	(2,951)		—		(6,033)		(2,316)
Income before income taxes	$	467,669	$	109,225	$	1,060,881	$	201,674

11. Credit Agreement

The Company is a party to a certain credit agreement (the “Credit Agreement”), which provides for a senior secured term loan maturing in October 2028 (“2028 Term Loan"), a senior secured term loan maturing in August 2030 (“2030 Term Loan”), and a revolving credit facility.

In March 2024, the Company entered into Amendment No. 10 to the Credit Agreement which reduces the interest rate margin from 3.1% to 2.5% with respect to SOFR loans (or from 2.0% to 1.5% with respect to base rate

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loans). In connection with the amendment, the Company increased the aggregate principal amount of the 2030 Term Loan to $2.09 billion and reduced the aggregate principal amount of the 2028 Term Loan to $1.46 billion. The other material terms of the Credit Agreement remain unchanged.

The transaction was assessed at the syndicated lender level and was accounted for primarily as a debt modification. The Company expensed $6.2 million of third-party costs incurred with the amendment in other income, net in the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2024. Fees paid to the lenders in connection with the amendment were recorded as an additional debt discount and are amortized to interest expense over the remaining term, together with unamortized original debt issuance costs and discount, using the effective interest method.

In March 2024, the Company drew down an additional $418.7 million from the revolving credit facility to fund certain repurchases under the Company's share repurchase program. As of March 31, 2024, the entire outstanding amount under the revolving credit facility of $603.7 million was repaid in full. KKR Corporate Lending (CA) LLC, an affiliate of KKR Denali Holdings L.P. (“KKR Denali”) which owns more than 10% of the Company's voting interests, has provided revolving credit commitments in the amount of $15.0 million under the revolving credit facility.

12. Related Party Transactions

On February 29, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with KKR Denali, and BofA Securities, Inc., acting for themselves and as representative of other underwriters (collectively, the “Underwriters”), in connection with a secondary public offering (the “Offering”) of 19,866,397 shares of the Company's Class A common stock by KKR Denali. Pursuant to the Underwriting Agreement, on March 6, 2024, the Company repurchased from the Underwriters 10,466,397 shares of Class A common stock sold to the Underwriters by KKR Denali in the Offering at a price per share of $54.46, the same per share price paid by the Underwriters to KKR Denali in the Offering. In connection with the Offering, KKR Denali converted 16,000,000 shares of Class B common stock to Class A common stock. See Note 6 – Equity for additional information on the share repurchase program.

On February 14, 2024, the Company entered into certain investment and arm's length commercial agreements with Humans, Inc. See Note 3 - Financial Instruments and Fair Value Measurements for additional information. Eduardo Vivas, a member the Company's board of directors, serves as the Chief Operating Officer of Humans, Inc., and a member of its board of directors.

On March 8, 2019, the Company entered into a promissory note with Rafael Vivas, the brother of Eduardo Vivas, a member of the Company's board of directors, for the purpose of advancing him funds to allow him to early exercise his stock options (“Vivas Note”). The Vivas Note was issued in the amount of $2.3 million at an interest rate of 2.59%, and later amended on August 7, 2020 to lower the interest rate on the outstanding balance of such note to the then applicable IRS annual mid-term rate of 0.41%. On March 8, 2024, the principal amount due under the Vivas Note plus accrued interest, or $2.3 million, was repaid in full to the Company and the Vivas Note was extinguished.

The Company had no other material related party transactions for the three and nine months ended September 30, 2024 and 2023.

13. Subsequent Events

In October 2024, the Company's Board approved an increase to the repurchase program of $2.0 billion such that up to $2.3 billion of Class A common stock may be repurchased.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” and other parts of this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

Our mission is to create meaningful connections between companies and their ideal customers. We provide end-to-end software and AI-powered solutions for businesses to reach, monetize and grow their global audience. We also operate a portfolio of owned mobile apps and accelerated our market penetration through an active acquisition and partnership strategy. Our scaled business model sits at the nexus of the advertising ecosystem, which creates a durable competitive advantage that has fueled our clients’ success and our strong growth.

Since our founding in 2011, we have been focused on building a software-based platform for advertisers to improve the marketing and monetization of their content. Our founders, who are mobile app developers themselves, quickly realized the real impediment to success and growth in the advertising ecosystem was a discovery and monetization problem—breaking through the congested app stores to efficiently find users and successfully grow their business. Their first-hand experience with these challenges led to the development of our infrastructure and Software Platform. We capitalized on our success and understanding of the mobile app ecosystem by entering into the mobile game apps industry in 2018. Our global diversified portfolio of apps now consists of over 200 free-to-play mobile games across five genres, run by ten studios.

For the three months ended September 30, 2024, our revenue increased 39% year-over-year to $1.20 billion, from $864.3 million in the three months ended September 30, 2023. We generated net income of $434.4 million and $108.6 million for the three months ended September 30, 2024 and 2023, respectively. We generated Adjusted EBITDA of $721.6 million and $419.3 million for the three months ended September 30, 2024 and 2023, respectively. Additionally, our net cash provided by operating activities was $1.40 billion and $717.5 million in the nine months ended September 30, 2024 and 2023, respectively. We generated Free Cash Flow of $1.38 billion and $697.3 million for the nine months ended September 30, 2024 and 2023, respectively. Given our strong financial position, we have been able to reinvest in our expansion and growth, and repurchase shares of our Class A common stock. See the section titled “Non-GAAP Financial Measures” below for definitions of our non-GAAP financial measures and reconciliations of the most directly comparable financial measures calculated in accordance with GAAP to these measures.

Our Business Model

We collect revenue from our Software Platform and our Apps. During the three months ended September 30, 2024, Software Platform Revenue represented 70% of total revenue and Apps Revenue represented 30% of total revenue.

We report our operating results through two reportable segments: Software Platform and Apps.

Our CODM, the Chief Executive Officer, evaluates performance of each segment based on several factors, of which the financial measures are segment revenue and segment adjusted EBITDA, as defined in Note 10 to our condensed consolidated financial statements.

The Software Platform and Apps segments provide a view into the organization of our business and generate revenue as follows:

Software Platform Revenue

We primarily generate Software Platform Revenue from fees paid by advertisers who use our Software Platform to grow and monetize their content. We are able to grow our Software Platform Revenue by improving our various software technologies.

Software Platform clients include a wide variety of advertisers, from indie developer studios to some of the largest global internet platforms, such as Facebook and Google. Our Software Platform provides advertisers with

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access to over 1.4 billion daily active users1. As such, we see multiple opportunities to gain new Software Platform clients, and to increase spend from existing clients, as we help them grow their businesses and make them more successful.

Our Software Platform includes AppDiscovery, MAX, Adjust, and Wurl. Clients use AppDiscovery to automate, optimize, and manage their user acquisition investments. They set marketing and user growth goals, and AppDiscovery optimizes their ad spend in an effort to achieve their return on advertising spend targets and other marketing objectives. AppDiscovery comprises the vast majority of revenue from our Software Platform. Revenue is generated from our advertisers, typically on a performance basis, and shared with our advertising publishers, typically on a cost per impression model.

Software Platform clients use MAX to optimize purchases of app advertising inventory. The MAX tool provides insights to manage against key performance indicators, understand the long-term value of users, and help manage profitability. Revenue from MAX is generated based on a percentage of client spend. As more advertising networks move to in-app real-time bidding, we expect growth in the adoption of, and revenue from, MAX.

Software Platform clients use Adjust's measurement and analytics marketing platform to better understand their users' journey while allowing marketers to make smarter decisions through measurement, attribution and fraud prevention. Revenue from Adjust is primarily generated from an annual software subscription fee.

Software Platform clients use Wurl's connected TV ("CTV") platform to distribute streaming video, maximize advertising revenue, and acquire and retain viewers or subscribers. Revenue from Wurl is primarily generated from content companies, typically on a usage-based model.

Apps Revenue

Apps Revenue is generated when a user of one of our Apps makes an in-app purchase ("IAP") and when clients purchase the digital advertising inventory of our portfolio of Apps ("IAA"). We are able to grow our Apps Revenue by adding more apps to our Apps portfolio and increasing engagement on our existing Apps.

Our Apps are generally free-to-play mobile games and generate IAP Revenue through IAPs. IAPs consist of virtual goods used to enhance gameplay, accelerate access to certain features or levels, and augment other mobile game progression opportunities for the user. IAPs drive more engagement and better economics from our Apps. The vast majority of our IAP revenue flows through two app stores, Apple App Store and Google Play, which charge us a standard commission on IAPs. IAP Revenue represented 68% of total Apps Revenue for the three months ended September 30, 2024.

During the three months ended September 30, 2024, we had an average of 1.6 million Monthly Active Payers ("MAPs") across our portfolio of Apps. Over that period, we had an Average Revenue Per Monthly Active Payer ("ARPMAP") of $52. See “Key Metrics” below for additional information on how we calculate MAPs and ARPMAP.

IAA clients that purchase advertising inventory from our Apps are able to target highly relevant users from our diverse and global portfolio of over 200 mobile games. Our clients leverage a broad set of high-performing mobile ad formats, including playable and rewarded video, and are able to match these ads with relevant users resulting in a better return on their advertising spend. By increasing the number of users and their engagement, as well as better matching ads with the appropriate target audience, we are able to increase our revenue from IAA clients that purchase advertising inventory from our Apps. IAA Revenue represented 32% of total Apps Revenue for the three months ended September 30, 2024.

Key Metrics

We review the following key metrics on a regular basis in order to evaluate the health of our business, identify trends affecting our performance, prepare financial projections, and make strategic decisions.

Monthly Active Payers ("MAPs"). We define a MAP as a unique mobile device active on one of our Apps in a month that completed at least one IAP during that time period. A consumer who makes IAPs within two separate Apps on the same mobile device in a monthly period will be counted as two MAPs. MAPs for a particular time period longer than one month are the average MAPs for each month during that period. We estimate the number of MAPs by aggregating certain data from third-party attribution partners. We estimate that our counted MAPs generated substantially all of our IAP Revenue during the three months ended September 30, 2024, and as such,

1 We calculate daily active users as the average number of unique device identities that open a mobile app (whether that mobile app our own or a third party’s) which has our software development kit (SDK) on each day in a period. We measure this figure through our SDK. An individual who uses an app in more than one country on a particular day will be counted as more than one unique device identity; however, if an individual uses more than one app in the same day, such individual is only counted once. This figure does not include any users who have opted out of allowing apps to track on their mobile phone.

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management believes that MAPs is a useful metric to measure the engagement and monetization potential of our games.

Average Revenue Per Monthly Active Payer ("ARPMAP"). We define ARPMAP as (i) the total IAP Revenue derived from our Apps in a monthly period, divided by (ii) MAPs in that same period. ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that period. ARPMAP shows how efficiently we are monetizing each MAP.

The following table shows our Monthly Active Payers and Average Revenue Per Monthly Active Payer for the three months ended September 30, 2024 and 2023.


	Three Months Ended September 30,
	2024		2023
Monthly Active Payers (millions)	1.6		1.8
Average Revenue Per Monthly Active Payer	$	52	$	46

Our key metrics are not based on any standardized industry methodology and are not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our key metrics may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. The numbers that we use to calculate MAPs and ARPMAP are based on internal data. While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA for a particular period as net income before interest expense, other income, net (excluding certain recurring items), provision for income taxes, amortization, depreciation and write-offs and as further adjusted for stock-based compensation expense, transaction-related expense and transaction bonus, publisher bonuses, restructuring costs, impairment and (gain) loss in connection with the disposal of long-lived assets, non-operating foreign exchange (gain) losses, and change in the fair value of contingent consideration. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue for the same period.

Adjusted EBITDA and Adjusted EBITDA margin are key measures we use to assess our financial performance and are also used for internal planning and forecasting purposes. We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to investors, analysts, and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors, and other interested parties to evaluate and assess performance. We use Adjusted EBITDA and Adjusted EBITDA margin in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance.

Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to financial information presented in accordance with GAAP. These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statement of operations that are necessary to run our business. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our Adjusted EBITDA and Adjusted EBITDA margin should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.

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The following table provides our Adjusted EBITDA and Adjusted EBITDA margin for the three and nine months ended September 30, 2024 and 2023, and a reconciliation of net income to Adjusted EBITDA:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
	(in thousands. except percentages)
Revenue	$	1,198,235		$	864,256		$	3,336,469		$	2,329,826
Net income	$	434,420		$	108,639		$	980,572		$	184,478
Net margin	36.3%			12.6%			29.4%			7.9%
Adjusted as follows:
Interest expense	75,213			78,583			224,061			204,081
Other income, net	(4,500)			(771)			(17,138)			(26,359)
Provision for income taxes	33,249			586			80,309			17,196
Amortization, depreciation and write-offs	99,635			121,797			320,843			369,897
Loss on disposal of long lived assets	—			—			1,646			—
Non-operating foreign exchange gain	(935)			(613)			(1,159)			(1,159)
Stock-based compensation	81,557			110,839			275,534			275,058
Transaction-related expense	26			231			880			995
Restructuring costs	2,951			—			6,033			2,316
Adjusted EBITDA	$	721,616		$	419,291		$	1,871,581		$	1,026,503
Adjusted EBITDA margin	60.2		%	48.5		%	56.1		%	44.1		%

Free Cash Flow

We define Free Cash Flow as net cash provided by operating activities less purchases of property and equipment and principal payments of finance leases. We use Free Cash Flow to help manage the health of our business, prepare budgets and for capital allocation purposes. We believe Free Cash Flow provides useful supplemental information to help investors understand underlying trends in our business and our liquidity. Free cash flow has certain limitations, including that it does not reflect our future contractual commitments. Our definition may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish Free Cash Flow or similar metrics. Thus, our Free Cash Flow should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.

The following table provides our Free Cash Flow for the nine months ended September 30, 2024 and 2023, and a reconciliation of net cash provided by operating activities to Free Cash Flow:


	Nine Months Ended September 30,
	2024		2023
	(in thousands)
Net cash provided by operating activities	$	1,398,008	$	717,522
Less:
Purchase of property and equipment	(4,286)		(4,002)
Principal payments of finance leases	(15,524)		(16,191)
Free Cash Flow	$	1,378,198	$	697,329
Net cash used in investing activities	$	(106,387)	$	(71,025)
Net cash used in financing activities	$	(1,226,687)	$	(1,392,267)

Factors Affecting Our Performance

We believe that the future success of our business depends on many factors, including the factors described below. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to continue to grow profitably while maintaining strong cash flow.

Continue to invest in innovation

We have made, and intend to continue to make, significant investments in our Software Platform to enhance its effectiveness and value proposition for our clients. We expect that these investments will require spending on research and development, and acquisitions and partnerships related to technology components and products. We believe investments in our software, including our AI-powered advertising engine AXON, AppDiscovery, Adjust, and

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MAX, will further improve effectiveness for advertisers. In addition, we plan to continue to invest in the AI-based, self-learning capabilities of our advertising recommendation engine, AXON. Our investments will also allow us to enter into and expand into new verticals outside of gaming, such as e-commerce, CTV, original equipment manufacturer ("OEM"), and carrier-related markets. While our investments in research and development and acquisitions and partnerships may not result in revenue in the near term, we believe these investments position us to increase our revenue over time.

Retain and grow existing clients

We rely on existing clients for a significant portion of our revenue. As we improve our Software Platform and Apps, we can attract additional spend from these clients. Our clients include indie studio developers and some of the largest advertising platforms in the world. Our Software Platform provides advertisers with access to over 1.4 billion daily active users. As such, we believe there is significant room for us to further expand our relationships with these clients and increase their usage of our Software Platform. We have invested in targeted sales and account-based marketing efforts to identify and showcase opportunities to clients and plan to continue to do so in the future.

In the past, our clients have generally increased their usage of our Software Platform, and as a result, growth from existing clients has been a primary driver of our revenue growth. We must continue to retain our existing clients and expand their spend with us over time to continue to grow our revenue, increase profitability and drive greater cash flow.

Add new clients globally

Our future success depends in part on our ability to acquire new clients. During the three months ended September 30, 2024, 47% of our revenue from Software Platform and IAA Revenue clients was generated from outside of the United States. We believe that the global opportunity is significant and will continue to expand as developers and advertisers outside the United States adopt our Software Platform and advertise on our Apps. We also see opportunities to acquire new clients outside of mobile gaming, as the capabilities of our Software Platform are relevant to the broader advertising ecosystem. We are investing in direct sales, product development, education, and other capabilities to drive increased awareness and adoption of our Software Platform and Apps, which investments may impact our profitability in the near term as we seek further scale.

Continued execution of strategic partnerships

We continue to explore strategic partnership opportunities related to our Software Platform, and the expansion of the markets it serves and we may from time to time evaluate strategic acquisitions and partnerships opportunistically. From the beginning of 2018 through September 30, 2024, we have invested approximately $4.1 billion in 33 strategic acquisitions and partnerships with mobile app developers and for technologies or relationships to enhance our Software Platform including the acquisition of MAX in 2018, Adjust in April 2021, MoPub in January 2022, and Wurl in April 2022. We believe our future results of operations will be affected by our ability to continue to identify and execute such transactions that are accretive to our growth and profitability.

Growth and structure of the mobile app and advertising ecosystems

Our business and results of operations will be impacted by industry factors that drive the overall performance of the mobile app and advertising ecosystems. Mobile app developers, including AppLovin, rely on third-party platforms, such as the Apple App Store and Google Play Store, among others, to distribute games, collect payments made for IAPs, and target users with relevant advertising. We expect this to continue for the foreseeable future. These third-party platforms have significant market power and discretion to set platform fees, select which apps to promote, and decide how much consumer information to provide to advertising networks that enable our Software Platform to target users with personalized and relevant advertising and allocate marketing campaigns in an efficient and cost-effective manner. Any changes made in the policies of third-party platforms could drive rapid change across the mobile app and advertising ecosystems. For example, in April 2021, Apple started implementing its application tracking transparency framework that, among other things, requires users' opt-in consent for certain types of tracking. While this transparency framework has not had a significant impact on our overall business, it may do so in the future, including with respect to the effectiveness of our advertising practices and/or our ability to efficiently generate revenue for our Apps. We rely in part on Identifier for Advertisers ("IDFA") to provide us with data that helps our Software Platform better market and monetize Apps. In light of the IDFA and transparency changes, we made changes to our data collection practices. To the extent we are unable to utilize IDFA or a similar offering, or if the transparency changes and any related opt-in or other requirements result in decreases in the availability or utility of data relating to Apps, our Software Platform may not be as effective, we may not be able to continue to efficiently generate revenue for our Apps, and our revenue and results of operations may be harmed. Additionally, Apple implemented new requirements for consumer disclosures regarding privacy and data processing practices in

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December 2020, which has resulted in increased compliance requirements and could result in decreased usage of our Apps. Apple incorporated new SDK privacy controls into iOS 17, which was released in September 2023, including privacy manifests and signatures designed to allow app developers to outline the data practices for SDKs embedded in their apps, manage tracking domains within SDKs, and curb device fingerprinting by requiring app developers to select allowed reasons for using data received through certain APIs. In February 2022, Google announced its Privacy Sandbox initiative for Android, a multi-year effort expected to restrict tracking activity and limit advertisers' ability to collect app and user data across Android devices. In January 2024, Google commenced rolling out a Chrome feature, called Tracking Protection, which limits cross-site tracking. In May 2023, Google announced new consent management platform ("CMP") requirements for ads served in the European Economic Area ("EEA") and UK, which requires, as of January 2024, publishers using Google AdSense, Ad Manager, or AdMob to use a CMP that has been certified by Google and has integrated with the Interactive Advertising Bureau’s (“IAB”) Transparency and Consent Framework when serving ads to users in the EEA or the UK. While to date these third-party platform privacy changes have had some impact on the discoverability of apps across these platforms and have had a relatively muted aggregate impact on our results of operations, the ultimate impact of these or any similar or future changes to the policies of Apple or Google could adversely affect our business, financial condition, and results of operations.

New tools for developers, industry standards, and platforms may emerge in the future. We believe our focus on the advertising ecosystem has allowed us to understand the needs of our clients and our relentless innovation has enabled us to quickly adapt to changes in the industry and pioneer new solutions. We must continue to innovate and stay ahead of developments in the advertising and mobile app ecosystems in order for our business to succeed and our results of operations to continue to improve.

Current Economic Conditions

We are subject to risks and uncertainties caused by global economic conditions and events with significant macroeconomic impacts, including, but not limited to, international conflicts in Ukraine and the Middle East and actions taken to counter inflation. Inflation, rising interest rates and reduced consumer confidence have caused and may continue to cause our clients to be cautious in their spending. The full impact of these macroeconomic events and the extent to which these macro factors may impact our business, financial condition, and results of operations in the future remains uncertain. The risks related to our business are further described in the section titled “Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

We generate Software Platform Revenue primarily from fees collected from advertisers spending on AppDiscovery, typically on a performance basis, then shared with our advertising publishers, typically on a cost per impression basis. Software Platform Revenue also includes fees generated based on a percentage of client spend through MAX and subscription fees for Adjust's measurement and analytics marketing platform. Revenue from other services within the Software Platform was not material.

We generate Apps Revenue from IAPs made by the users within our Apps and from IAA generated from advertisers that purchase advertising inventory from our diverse portfolio of Apps.

Cost of Revenue and Operating Expenses

Cost of revenue. Cost of revenue consists primarily of third-party payment processing fees for distribution partners, amortization of acquired technology-related intangible assets, amortization of finance lease right-of-use assets related to certain servers and networking equipment and costs for third-party cloud service providers. Third-party payment processing fees relate to IAP Revenue. The fees for IAPs are processed and collected by third-party distribution partners. We expect our cost of revenue to increase in absolute dollars over the long term as our business and revenue continue to grow. We also expect our cost of revenue as a percentage of revenue to fluctuate period-over-period.

Sales and marketing. Sales and marketing expenses consist primarily of user acquisition costs, marketing programs and other advertising expenses, professional services costs related to the marketing of apps by third parties, personnel-related expenses including salaries, employee benefits, and stock-based compensation for employees engaged in sales and marketing activities, amortization of acquired user-related intangible assets, travel and allocated facilities and information technology costs.

We plan to continue to invest in sales and marketing to grow our Software Platform customer base and increase brand awareness. We also plan to continue to invest in new App launches to the extent we see

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opportunities for cost-effective growth. We expect sales and marketing expenses to fluctuate period-over-period as we launch new games. We also expect our sales and marketing expenses as a percentage of revenue to fluctuate period-over-period in the near term as we invest to grow our customer base and increase brand awareness, and to decrease over the long term as we benefit from greater scale.

Research and development. Research and development expenses consist primarily of product development costs, including personnel-related expenses such as salaries, employee benefits, and stock-based compensation for employees engaged in research and development activities, professional services costs related to development of new apps by third parties, consulting costs, regulatory compliance costs, and allocated facilities and information technology costs.

We plan to continue to invest in research and development to continue to enhance our Software Platform and to improve existing games and develop new games. We expect our research and development expenses as a percentage of revenue to fluctuate period-over-period in the near term as we invest to enhance our Software Platform and improve our existing Apps and develop new Apps, and to decrease over the long term as we benefit from greater scale.

General and administrative. General and administrative expenses consist primarily of costs incurred to support our business, including personnel-related expenses such as salaries, employee benefits, and stock-based compensation for employees engaged in finance, accounting, legal, human resources and administration, professional services fees for legal, accounting, recruiting, and administrative services (including transaction-related expenses), insurance, travel, and allocated facilities and information technology costs.

We plan to continue to invest in our general and administrative function to support the growth of our business. We expect our general and administrative expenses as a percentage of revenue to fluctuate period-over-period in the near term as we invest to support the growth of our business, and to decrease over the long term as we benefit from greater scale.

Other Income and Expenses

Interest expense. Interest expense consists primarily of interest expense associated with our outstanding debt, including accretion of debt discount, and gains and losses of interest rate swap related to the variable interest payments associated with our outstanding debt.

Other income, net. Other income, net, primarily includes interest earned on our cash and cash equivalents, fair value adjustments relating to our non-marketable equity securities, and foreign currency gains and losses.

Provision for income taxes. We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have different statutory tax rates than those in the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. Accordingly, our effective tax rate will vary depending on the relative proportion of foreign to domestic income, impacts from acquisition restructuring, deduction benefits related to foreign-derived intangible income, future changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. Additionally, our effective tax rate can vary based on the amount of pre-tax income or loss.

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Results of Operations

The following table summarizes our historical condensed consolidated statements of operations data:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Revenue	$	1,198,235	$	864,256	$	3,336,469	$	2,329,826
Costs and expenses:
Cost of revenue(1)(2)	269,659		265,049		846,354		785,584
Sales and marketing(1)(2)	205,753		212,352		634,547		607,755
Research and development(1)	149,990		159,288		469,209		441,563
General and administrative(1)	37,899		41,249		120,880		116,231


Total costs and expenses	663,301		677,938		2,070,990		1,951,133
Income from operations	534,934		186,318		1,265,479		378,693
Other income (expense):
Interest expense	(75,213)		(78,583)		(224,061)		(204,081)
Other income, net	7,948		1,490		19,463		27,062
Total other expense, net	(67,265)		(77,093)		(204,598)		(177,019)
Income before income taxes	467,669		109,225		1,060,881		201,674
Provision for income taxes	33,249		586		80,309		17,196
Net income	$	434,420	$	108,639	$	980,572	$	184,478

__________________

(1) Includes stock-based compensation expense as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Cost of revenue	$	1,314	$	1,309	$	4,104	$	3,942
Sales and marketing	22,203		26,025		67,651		62,121
Research and development	47,940		70,462		169,205		176,337
General and administrative	10,100		13,043		34,574		32,658
Total stock-based compensation	$	81,557	$	110,839	$	275,534	$	275,058

(2) Includes amortization expense related to acquired intangibles as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Cost of revenue	$	73,679	$	93,398	$	245,493	$	288,180
Sales and marketing	16,851		16,829		50,472		50,397
Total amortization expense related to acquired intangibles	$	90,530	$	110,227	$	295,965	$	338,577

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The following table sets forth the components of our condensed consolidated statements of operations for each of the periods presented as a percentage of revenue(1):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	100	%	100	%	100	%	100	%
Costs and expenses:
Cost of revenue	23	%	31	%	25	%	34	%
Sales and marketing	17	%	25	%	19	%	26	%
Research and development	13	%	18	%	14	%	19	%
General and administrative	3	%	5	%	4	%	5	%


Total costs and expenses	55	%	78	%	62	%	84	%
Income from operations	45	%	22	%	38	%	16	%
Other income (expense):
Interest expense	(6)	%	(9)	%	(7)	%	(9)	%
Other income, net	1	%	—	%	1	%	1	%
Total other expense, net	(6)	%	(9)	%	(6)	%	(8)	%
Income before income taxes	39	%	13	%	32	%	9	%
Provision for income taxes	3	%	0	%	2	%	1	%
Net income	36	%	13	%	29	%	8	%

_________________

(1) Totals of percentages of revenue may not foot due to rounding.

Comparison of Our Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Revenue


	Three Months Ended September 30,				2023 to 2024 % change		Nine Months Ended September 30,				2023 to 2024 % change
	2024		2023				2024		2023
	(in thousands, except percentages)
Software Platform Revenue	$	835,186	$	504,452	66	%	$	2,224,571	$	1,265,273	76	%
In-App Purchases Revenue	246,344		247,309		—	%	756,110		732,262		3	%
In-App Advertising Revenue	116,705		112,495		4	%	355,788		332,291		7	%
Total Apps Revenue	363,049		359,804		1	%	1,111,898		1,064,553		4	%
Total Revenue	$	1,198,235	$	864,256	39	%	$	3,336,469	$	2,329,826	43	%

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

For the three months ended September 30, 2024, our Software Platform Revenue increased by $330.7 million, or 66%, compared to the same period in the prior year primarily due to improved AppDiscovery performance, where net revenue per installation increased 22% and the volume of installations increased 39%. We do not recognize Software Platform Revenue from transactions with our studios.

For the three months ended September 30, 2024, our Apps Revenue increased by $3.2 million, from the prior year period, of which, our IAP Revenue from Apps decreased by $1.0 million, due primarily to a 5% decrease in the volume of in-app purchases, partially offset by a 4% increase in price per in-app purchase, and our IAA Revenue from Apps increased by $4.2 million, or 4%, due primarily to an 8% increase in the volume of advertising impressions, partially offset by a 4% decrease in price per advertising impression.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

For the nine months ended September 30, 2024, our Software Platform Revenue increased by $959.3 million, or 76%, compared to the same period in the prior year, due to improved AppDiscovery performance, where net revenue per installation increased 11% and the volume of installations increased 64%. We do not recognize Software Platform Revenue from transactions with our studios.

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For the nine months ended September 30, 2024, our Apps Revenue increased by $47.3 million, or 4%, from the prior year period, of which, our IAP Revenue from Apps increased by $23.8 million, or 3%, primarily due to a 1% increase in the volume of in-app purchases and a 3% increase in price per in-app purchase, and our IAA Revenue from Apps increased by $23.5 million, or 7%, due primarily to an 53% increase in the volume of advertising impressions, partially offset by a 30% decrease in price per advertising impression.

Cost of revenue


	Three Months Ended September 30,						2023 to 2024 % Change		Nine Months Ended September 30,						2023 to 2024 % change
	2024			2023					2024			2023
	(in thousands, except percentages)
Cost of revenue	$	269,659		$	265,049		2	%	$	846,354		$	785,584		8	%
Percentage of revenue	23		%	31		%			25		%	34		%

Cost of revenue in the three months ended September 30, 2024 increased by $4.6 million, or 2%, compared to the same period in the prior year, due primarily to an increase of $27.9 million in expenses associated with operating our network infrastructure driven by the growth in our Software Platform operations, offset by a decrease of $23.4 million in amortization of intangible assets resulting from the end of the useful life of certain intangible assets.

Cost of revenue in the nine months ended September 30, 2024 increased by $60.8 million, or 8%, compared to the same period in the prior year, due primarily to an increase of $98.5 million in expenses associated with operating our network infrastructure driven by the growth in our Software Platform operations, offset by a decrease of $44.1 million in amortization of intangible assets resulting from the end of the useful life of certain intangible assets.

Sales and marketing

Three Months Ended September 30,

2023 to 2024
% Change

Nine Months Ended September 30,

2023 to 2024
% change

2024

AppLovin Corp [APP] Filings
10-Q	[2024-11]
10-Q	[2024-08]
10-Q	[2024-05-08]
10-K	[2024-02-26]
10-Q	[2023-11-08]
10-Q	[2023-08-09]
10-Q	[2023-05-10]
10-K	[2023-02-28]
10-Q	[2022-11-10]
10-Q	[2022-08-12]
10-Q	[2022-05-13]
10-K	[2022-03-11]
S-1	[2021-11-26]
10-Q	[2021-11-12]
10-Q	[2021-08-13]
10-Q	[2021-05-14]
S-1	[2021-03-02]